"Perhaps the sentiments put forth here are not yet sufficiently fashionable to procure them general favor. A long habit of not thinking a thing wrong gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. But the tumult soon subsides. Time makes more converts than reason."
--Thomas Paine

Monday, July 16, 2012

Watching the presidential contest has been like watching the
beginning of an America’s Cup race. The gun does not sound for the beginning of
the race until Labor Day, after the parties hold their conventions and
Americans fully engage in the contest. The summer months are a time of pre-race
maneuvering, as Team Obama and Team Romney are jockeying for position, seeking
to define the terms of the race to come.

Despite Democrat euphoria during Republican primaries that
seemed to turn back the clock on such settled matters as contraception—and
pushed Obama’s reelection odds above 60% on Intrade—Mitt Romney emerged largely
unscathed. This week, Real Clear Politics shows the race at 47-45, with Obama
up by just 1-3 points in the critical states of Ohio, Florida, Virginia, and
the new swing state, Michigan. In rough terms, Obama needs two of these states
to win, Romney three, but by any measure, this is now a race.

The two sides largely view the race in the same terms. Each
side has to motivate its own base, and each is fighting for the still-undecided
center. And each side has chosen to make the appeal to the center largely a
referendum on the Other Guy. The Republican argument is that Obama has made a
hash of the economy. The Democrat counter argument is that it was hash when he
got there and he is doing as much as he can with a stridently negative
Republican House blocking him at every turn. The Democrat argument is that
Romney is a plutocrat who cares not a whit for the large swath of the American
electorate. It is the Republican counter argument that seems passive and
unfocused.

There is nothing new in attacking Mitt Romney for his years
at Bain or his uncaring mien. Mike Huckabee’s famous quip that voters would
ultimately disdain Romney because he “looks like the guy that fired you” has
become the essence of the Obama strategy to define Romney before the fall race
begins.

Making the opponent unacceptable is a time-honored strategy,
and sometimes it works and sometimes it doesn’t. In 1964, Democrats succeeded
in defining Barry Goldwater as unstable—if not an outright lunatic—in a
campaign that culminated with the classic "Daisy" campaign ad. On the
other hand, in 1980, Jimmy Carter sought to define Ronald Ronald Reagan as a
dangerous alternative—in the vein of Goldwater—and led in the polls through the
summer, only to see the strategy ultimately fail as Reagan was humanized
through the fall, and ultimately won handily following the debates. For their
part, Republicans used the strategy to great effect in 2004, when the Swift
Boat attacks on John Kerry through the summer left his campaign sorely damaged
once the fall campaign arrived.

The Romney campaign response to Democrat attacks seems to
reflect either a lack of preparedness or a view that what happens now will not
materially matter once the real race starts. It is simply inconceivable that
the Romney camp did not anticipate the Bain attacks—after all, Romney has faced
them before. Nor does it seem possible—despite Abby Huntsman's suggestion that
Romney would resign the campaign before releasing more tax returns—that the
campaign does not ultimately plan to release all of Romney’s financial
information. Therefore, one has to believe that we are watching a rope-a-dope
strategy of letting the summer weeks go by, content to let Team Obama punch
itself out. And to date, Team Romney may be right. After all, the national
numbers have remained in the range of 47-45 for some time, and the salient
point of this is that as long as the President cannot sustain his numbers above
50%, the race is very much in play.

If this is the plan, the moment that seemed discordant was
Romney’s demand for an apology. Apologies, and specifically demands for
apologies, are just not part of the game. Or as Mitt Romney himself lecturedMike Huckabee in 2008, rule number one in politics: No whining.

Romney’s demand for an apology evinces weakness—particularly
to a President who is now famously picking individuals to be targeted by cruise
missiles. This is not a normal stance for a Republican facing a Democrat. But
more than just violating his own political rule, by whining about attacks on
Bain and outsourcing Romney is missing an opportunity to take on the central
issue that has been missing from this presidential race.

Both candidates have given lip service to this race being
about the middle class, yet there has been little substantive discussion of
what that means. This is a real area of weakness for President Obama, whose
understanding of the economy appears shallow and whose selection of advisors
has been poor. On the other hand, Romney’s work at Bain should provide a window
into the real forces that have affected the U.S. economy over the past thirty
years. Specifically, outsourcing is a symptom, not a cause, of the problems
affecting the middle class. The potential of bringing manufacturing jobs back
to America is a good thing, but even that discussion has avoided the larger
question of what it would take for America to regain a sustained competitive
advantage in the global economy. As long as we don’t discuss our history and
the causes of decline, it is difficult to make meaningful policy decisions
going forward.

Richard Nixon remains a cloudy and widely reviled figure in
our politics, who lived out his years in disgrace, yet his presidency marked
the turning point in our modern economic history. He ended a war in Vietnam
that was escalated by two Democrat presidents. And more importantly, he began
the process of normalizing political relationships with our two greatest
political adversaries, the Soviet Union and China. In the economic realm, he
ended the Gold Standard and birthed OPEC as an economic force, both of which
contributed to the emergence of the U.S. dollar as the global reserve currency.

The ensuing end of the Cold War brought hundreds of millions
of workers out from behind the Iron Curtain and from formerly insular economies
such as India into the world labor market. During the years of the Cold War,
Democrats and Republicans alike envisioned a free trade world that would
replace military hostilities and the threat of nuclear war with economic
competition involving our former adversaries. And so it has.

The decline of the American middle class in the face of new,
global competition should have come as a surprise to no one. Over the past
three decades, nations across the world have build their own economies through
labor competition tied to pegged currencies that allowed them to deliver
low-cost goods to the U.S. consumer market. The fact that real incomes in the
U.S. have largely been flat over the past several decades could be seen as a
triumph, given the circumstances. Plunged into competition with nearly free
labor, one can imagine that the devastation of our economy might have been far
greater.

Unlike the President, Mitt Romney had a front seat during
this era of massive economic change. He sat in corporate boardrooms where
decisions were made to reduce costs or otherwise seek strategic advantage.
Reducing costs and seeking competitive advantage are part and parcel of
corporate strategy in competitive markets. Companies do this, or they die. And
seeing such companies survive rather than die was the work that Bain Capital
specialized in. If Bain Capital advised its portfolio companies to outsource
manufacturing or services—and it is inconceivable that it did not—this was not
out of animus to workers, but just part of the job. That is the way it is in
the real world.

And the way it is in the real world is what Mitt Romney and
Barack Obama should be talking about. The American worker has been lied to for
decades. Election year after election year, politicians pronounce the American
worker the best in the world, as if this was meaningful. Rarely does a
politician speak the truth: for decades now, American workers have been thrown
to the wolves, first in the interest of Cold War foreign policy, and more
recently in the interests of a political and corporate elites that profit
mightily from globalization.

Along with outsourcing, political contributions have become
a critical tool for seeking competitive advantage. The impacts of free trade
and political cronyism have been the focus of political campaigns on the right
and left. Pat Robertson, Ralph Nader, Ron Paul and Dennis Kucinich each spoke
to these issues, in nearly identical terms. Each have pointed out in great
specificity how our economic, budgetary and military policies have undermined
the middle class and served corporate interests, yet each were marginalized and
ultimately ridiculed by the aligned interests of the major political parties.

Today, the plight of the middle class is debated in terms of
inequality. Yet this debate has focused on who pays how much in
taxes—epitomized by the Occupy movement “single, clear demand” for a Robin Hood
tax—which again is a symptom of the problem, not the cause, rather than on
global labor and currency markets.

Mitt Romney maintains that his campaign is about the plight
of the middle class, yet so far, he has had little to say beyond the normal
prattle about knowing how to create jobs. He has failed to show how his inside
experience in the corporate world combined with his experience as a governor of
an industrial state give him a unique insights into the nature of global
economic competition, and the ability to craft solutions that might aid the
plight of working Americans. There is a case to be made for changes that would be directly enhance our competitive advantage as a nation—such as ending pegged currency relationships, building low cost energy as a national competitive advantage, addressing structural deficits—but Romney has not made that case.

This is the response that Romney has failed to make as the
onslaught continues from the Obama campaign. No apology will be forthcoming,
and none should be. Bain did—during Romney’s tenure or otherwise—what Bain was
supposed to do, what the rules of the competitive marketplace dictates that
companies must do. If there is an apology to be made, it should be from Romney
for his failure to make good on the central argument of his campaign: that he
understands how the economy works, and can translate that knowledge in to a
positive vision for renewal of the American economy.

For the next six weeks, the respective presidential
campaigns will seek to define the terms of the race to come. The Obama campaign
is an open book. As the incumbent, he has no choice but to run on his record.
Its challenge will be to motivate its base to replicate the turnout it achieved
four years ago—knowing that the moment of inspiration is past—keep the focus on
Romney's character and Republican recalcitrance, and convince independent
voters that the President remains their best option.

The Romney campaign is far more opaque, as even its summer
strategy seems to lack focus. Unlike the President, the Romney campaign has all
of the tools in place to assure a motivated base, from John Roberts’ treachery,
to the stewing resentments around contraception funding, to the ultimate
motivation: the thought of four more years of Barack Obama occupying the Oval
Office. Ironically—given Romney's bona fides as a moderate, blue state
governor—Romney’s challenge will be the independent vote. That vote disdains
the passions of the Republican base and is looking for more than a negative
motivation. Perhaps the Romney campaign summer strategy is playing rope-a-dope,
dumbing down expectations before a campaign of shock and awe to win the center.
Endorse Simpson-Bowles, break up the banks and tackle campaign finance
excesses.

Or perhaps what we see is what we get, and Mitt Romney
doesn’t really have anything to say. Or as one Massachusetts pol commented to
me a while back, "you'll see, there really is no there there."